Acquisition Payment Cycle

attainment and Payment Cycle According to Arens, Elder and Beasley (2006), is considered as the terzetto major transaction bicycle. The three major transactions in the erudition and compensation cycle include 1. Acquisition of goods and services 2. Cash Disbursements 3. grease ones palms returns and allowances and purchase discounts Components such as, acquisition of raw materials, equipment, supplies, utilities, repairs and maintenance, and research and development plays a major role in the acquisition and payment cycle.The major accounts that be associated with the acquisition and payment cycle ar, accounts payable, list, and expenses. The methodology for designing tests for phase 1 3 of the process includes identification of client risks affecting other accounts, oscilloscope tolerable misstatements, assessing inherent risk for accounts, and assessing control risks for accounts. Business functions included in the acquisition and payment cycle includes processing purcha se orders, receiving goods and services, recognizing the liability, and processing and enter cash disbursements.The incorporation of e-commerce affects the acquisition and payment cycle in legion(predicate) ways. Information about the products and services that Apollo Shoes offers is readily accessible on the internet. This could be a hindrance for Apollo Shoes, since the alliance competitors can mimic the companys products and services. For communication purposes, Apollo Shoes use the companys intranet to give out information securely. This action prevents a potential leak of information to the domain and competitors. Below is a detailed illustration of the audit of the acquisition and payment cycle for Apollo Shoes.TRANSACTION-RELATED AUDIT OBJECTIVE KEY cozy CONTROL special K running game OF CONTROL COMMON SUBSTANTIVE TESTS OF transactions 1. Recorded acquisitions argon for goods and services received, consistent with the best interests of the client. 2. Purchas e requisition, purchase order, receiving report, and vendors invoice atomic number 18 attached to the voucher. Acquisitions argon approved at the tight-laced level. Computer accepts entry of purchases only from authorized vendors in the vendor predominate shoot down. Documents argon cancelled to prevent their reuse.Vendors invoices, receiving reports, purchase orders, and purchase requisitions are versedly verified. interpret documents in voucher package for existence. get word index number of approval. Attempt to input transactions with valid and invalid vendors. Examine quality of cancellation. Examine feature of internal verification. Review the acquisitions journal, general ledger, and accounts payable overlook file for large or unusual accounts. Examine underlying documents for information and authenticity. Examine vendor master file for unusual vendors.Trace size up acquisitions to armory master file. Examine fixed assets acquired. TRANSACTION-RELATED AUDIT OB JECTIVE KEY INTERNAL CONTROL COMMON TEST OF CONTROL COMMON SUBSTANTIVE TESTS OF TRANSACTIONS 3. Existing acquisition transactions are record. 4. Purchase orders are prenumbered and accounted for. Receiving reports are prenumbered and accounted for. Vouchers are prenumbered and accounted for. Account for a sequence of purchase orders. Account for a sequence of receiving reports. Account for a sequence of vouchers. Trace from a file of receiving reports to the acquisitions journal. Trace from a file of vendors invoices to the acquisitions journal. 5. Recorded acquisition transactions are accurate. Calculations and amounts are internally verified. Batch totals are compared with computer summary reports. Acquisitions are approved for prices and discounts. Examine indication of internal verification. Examine file of destiny totals for initials of data control clerk compare totals to summary reports. Examine indication of approval. Compare recorded transactions in the acquis itions journal with the vendors invoice, receiving report, and other supporting documentation. Re-compute the clerical truth on the vendors invoice, including discounts and freight. TRANSACTION-RELATED AUDIT OBJECTIVE KEY INTERNAL CONTROL COMMON TEST OF CONTROL COMMON SUBSTANTIVE TESTS OF TRANSACTIONS 6. Acquisition transactions are properly classified. 7. An adequate map of accounts is used. Account classifications are internally verified. Examine procedures manual and chart of accounts.Examine indication of internal verification. Compare classification with chart of accounts by referring to vendors invoices. 8. Acquisition transactions are recorded on the correct dates. Procedures require recording transactions as in short as possible after the goods and services have been verified. Dates are internally verified. Examine procedures manual and observe whether unrecorded vendors invoices exist. Examine indication of internal verification. Compare dates of receiving reports and vendors invoices with dates in the acquisitions journal. 9. Acquisition transactions are properly included in the accounts payable and inventory master files and are properly summarized. Accounts payable master file circumscribe are internally verified. Accounts payable master file or political campaign balance totals are compared with general ledger balances. Examine indication of internal verification. Examine initials on general ledger accounts indicating comparison. Test clerical accuracy by footing the journals and tracing postings to general ledger and accounts payable and inventory master files. Results of the AuditOf the preliminary audit of Apollo Shoes acquisition and payment cycle a example size of 120 invoices were selected. There were missing invoices associate to the sample size. The invoices were properly posted to the general ledger sales and accounts receivable control accounts. Each invoice was posted to the appropriate account, no inconsisten cy was found. The invoices not listed to the proper accounts demonstrated no deviations to other documents, re-calculations, or comparisons. The pass judgment deferred payment approval notation, No credit approval, was not found in the related documents.When a notation of the, Wrong quantity billed, was posted, a definition of the explanation followed. In addition, the notation of, CM, meant the customer contacted Apollo Shoes stating an error and credit memo was issued on the following date. This notation caused all credit memos to fall in a debit to a sales return account followed by a credit to accounts receivable. In regards to the other documentation, there were no additional discrepancies to alert management regarding the acquisition and payment cycle. All findings of the 120 sample size were warranted.